Council grants tax break for planned assisted living project at Village Hill in Northampton

NORTHAMPTON — The City Council Thursday signed off on a 15-year tax break for an assisted living facility planned for Village Hill Northampton, despite reservations from at least one councilor who questioned extending the incentive over such a long period.

In a first-ever arrangement for the city, Mayor David J. Narkewicz worked out a proposal in which the city will grant the Grantham Group of Boston a 25 percent exemption on new growth for 15 years through the city’s tax increment financing plan, or TIF. That amounts to a tax break of about $150,000, based on today’s estimates.

Because more than half of the 83 units in the proposed Christopher Heights facility will be offered as affordable, Narkewicz proposed using Community Preservation Act funds to cover 20 percent of the tax break. That will leave the city absorbing the remaining 5 percent, or about $30,000.

Ward 3 City Councilor Owen Freeman-Daniels said that although he supports the project’s concept, he worried that the city could be putting itself in an unfavorable financial position by offering a tax break over 15 years.

“I think we should lower the risk,” Freeman-Daniels said.

His attempt to amend the TIF agreement to an 80 percent exemption over five years failed to win support. That plan, he said, would give Grantham Group more money up front, at $180,000, and lower the city’s exposure.

An official from the Grantham Group insisted on the 15-year commitment at Thursday’s meeting, just as the company has done since the issue came up last fall.

Managing Director Walter Ohanian said a short-term TIF would not provide the assurance the company needs to meet its financial obligations, nor would it satisfy the investors who back state and federal low-income tax credits that will be used to construct the facility.

Ohanian said the reimbursement the company will receive from the 43 low-income units will not be enough to meet the high operational costs to run the facility, and it’s imperative that the company knows what its expenses are each year.

“Doing it (a TIF) in a short amount of time isn’t long enough for me to take a chance,” he said.

Most councilors were swayed by the affordable housing promised in the new Christopher Heights facility, which they believe outweighs concerns about how the tax deal plays out.

Ward 2 City Councilor Paul D. Spector said the debate revolves around the city’s values and what it cares about, more than the money, which he feels is not a great risk.

Ward 6 City Councilor Marianne L. LaBarge said the project would be a great addition to the city and fill a need.

“Assisted living has been a huge concern with many people in this city. ... To me, this is the best way to go,” she said.

The facility is slated for a roughly 1-acre site on Village Hill’s north campus, just north of the Haskell Building. The project’s 43 affordable units would amount to more than the combined 39 affordable units that CPA money has supported for various projects since its inception.

“That’s a rather strong endorsement for proceeding with this,” City Council President William H. Dwight said.

The company will reserve units for low-income seniors earning 60 percent or less of the area median income. The units will carry an 80-year affordable housing restriction held by the city and the state Department of Housing and Community Development.

The remaining 40 units will be priced below the market rates for typical assisted living units in Northampton.

The developers initially asked for a tax break in the 75 percent range, which they received in four other Massachusetts communities where they operate.

But the council’s Economic Development, Housing and Land Use Committee balked at a tax break that steep and instead asked Narkewicz to keep the discount in the standard 5 percent range, similar to what has been approved for numerous other companies through the TIF program.

In the end, the council unanimously accepted the 25 percent tax break and the plan to underwrite most of that with CPA money.

In addition to affordable housing, the project qualifies for TIF status because of its guarantee of capital investment and increased employment opportunities for local workers.

The project will cost $13.4 million to develop and the facility will employ about 40 full- and part-time workers. It also will generate $8.7 million in construction spending and 65 construction jobs.

Narkewicz said the company will end up paying taxes on 75 percent of the project on a site that is currently vacant and generating no revenue. The city would assess the property at $2.8 million if it were operational right now, and it would generate $40,000 in property taxes. The city would see $30,000 after the 25 percent tax break is subtracted.

This is a great deal for Northampton's elderly population. To have that many affordable living assisted spaces is wonderful - I have seen too many times that people are forced to move from the community and friends they know to find affordable apartments and alternatives to nursing homes. Kudos to the city council and mayor for their help in facilitating this.